Past successes and future outlook

Building a billion dollar business in a small and emerging economy in Sri Lanka would have been quite a task, a journey filled with highs and lows.

 

Favourite Group Managing Director Kumar Mirchandani joined in conversation with MAS Holdings Chairman and Chief Innovations Officer (CIO) Deshamanya Mahesh Amalean to discuss the focal points of building a successful business and how the company prepares to face the challenges in the future.

 

2013-10-23bOpening the conversation Mirchandani invited Amalean to explain the critical factors that influenced the growth and success of MAS Holdings. “When we started in the early ’80s, the industry had already existed for more than 15 years and there were fairly large players in the industry at that particular point of time. For me, one of the thoughts that repeatedly kept coming to my mind was ‘How do we set up a business that would differentiate itself from the others in the industry so the customer would come to us instead of going across to a plant that is across the street?’ When the opportunity was presented to us through a 50-50 joint venture with Mast Industries, we really embraced the opportunity. That gave us the extremely radical platform to launch ourselves.”

 

Recruiting professionals

 

As soon as MAS Holdings was established, their partner had left them alone to build on their own. At this point Amalean had realised that it was important to recruit professionals to run the business and the professionals had to be of the same standards as the employees at Mast Industries.

 

“We were really looking at being equal partners in this venture. So early in our journey we brought onboard good professionals to the company and so a company privately owned by my two younger brothers and I had professionals on our staff. These professionals brought in outstanding team members and outstanding professionals under them because they wanted to be successful.”

 

2013-10-23b 1Mirchandani at this point questioned Amalean as to what made him take such a good decision to recruit professionals for his business. “I think we did not have a choice. We wanted to establish an organisation that could be strong internationally. There was no way we could do that without having a strong bench of people on our side. We wanted to be world class and it was very clear in those early years that if wanted to be world class we needed world class people,” responded Amalean.

 

Biggest challenges

 

Asked about the biggest challenges Amalean had to overcome in the industry, he stated: “At the initial stages, as a small manufacturer, even little things like getting funds initially for our business and attracting talent – good talent – sounded difficult. Bringing technical people into the company was also a challenge. But over a period of time these challenges were overcome after moving to a medium scale business and beyond. But the fundamentals of establishing a strong partnership with our customers and our suppliers, and establishing very good relationships in the communities we work in, in a highly product focused manner, ensured we were not distracted. But sometimes taking the right steps and doing the right things to make the business strong helped us ensure that we did not fall.”

 

Deliver on time

 

Looking back at 2005 when Sri Lanka was written off in the post quota era Amalean was asked what the industry has done with its strength and how Sri Lanka has got to where it is despite the crisis.

 

Amalean explained: “Our greatest strength as an industry and industrialists is when we need to make a commitment when we take an order. We do everything we can to deliver on time. People do business with people they trust, companies do business with companies they trust – the reason why there are lots of partnerships here is because of that approach and it is a very important aspect.

 

“The other reason is compliance with international standards. Right from the inception MAS Holdings has implemented labour safety standards and environment protection standards very early and that stood in our favour. So even after the detrimental were phased out some clients stayed back with us, unlike in some of the other countries and I can say this about two countries mainly because I have visited them; Indonesia – I was surprised when I visited them two years back as they are where they were or behind where they were 10-12 years back, because they were in the lower spectrum of the industry for the market segment and that business just completely phased out and went into China. The other country is the Dominican Republic, where a similar thing happened, their business was in the lower spectrum of the market segment and their business phased out and went to China. We were in a position to pole mount because we held on to our business and our customer base and we continued to develop as an industry.”

 

Innovation

 

Upon losing an opportunity to a Chinese company Amalean had to look at ways to innovate and to win customers. “Let me tell you a story about our Bodyline plant in Horana and a plant in India Intimate Fashions; both have been manufacturing a product for Victoria’s Secret and from the time we started operations till about 2005 we were the single largest supplier for them. What happened in 2006 was interesting; a Chinese company placed an exciting product on the till and that product was not 20% cheaper and as a result that company won the business from us. It was not 20% cheaper and it was not same product we were making; they came up with an innovative technology – there were no stitches in the product, it was a new product in the market and it was 20%-30% higher in cost. That shocked me and shocked the entire leadership team. Despite having manufacturing experts and doing strategic client research and having the customer own a share of the company, we still lost 40% of our business in the next two years, because someone innovated a product without stitches and the customer loved it.”

 

This led Amalean and his team to set up a research and innovation unit and interestingly enough they placed it close to their design unit thinking, which is where it should be. The company did not get traction and then the unit was moved out to the supply chain in Vietnam and with the technical people, engineering team and the specialists there the company gained more traction.

 

Mirchandani then turned the focus on the term ‘additive manufacturing’ – quoted from Dr. Michael Fralix’s presentation earlier in the day. Responding to that Amalean reiterated, “It is an interesting term and in future additive manufacturing is going to make all of us redundant.

 

Strategy

 

Asked about what Amalean has done to envision the company’s strategic view of where it should be and how he would drive it through the wider industry, Amalean said, “The only way to drive your vision and the strategic views is to do it through your company and show it to the industry how it is done. You will have to share the knowledge with the others in the industry. I think we have done that so far by putting the right infrastructure, drawing good talent.”

 

Mirchandani then observed that ‘knowledge sharing’ is a unique feature and corporations and collaboration in Sri Lanka have proved this. Adding on to that observation Amalean stated: “It is unique for Sri Lanka and it is unique for the industry and us as well. It is not there in the other sectors of the country. We get together and discuss our experiences and we as an industry have benefited tremendously by this.”

 

Commenting on institutional support used in innovation and the strategies and vision for the future, Amalean stated: “There is a lot that needs to be done and this is new to the State. A lot of the research centres are owned by the State and they have not been productive. The State is also thinking on how to make these units in the research centres productive and at the same time invite the private sector to play some part of this. Fortunately for all the sectors in the country we have all come to a point where the current technology we have cannot produce more than we are currently manufacturing. We need to research and we need to innovate in order to get to that next level. The State has introduced new regulations one of which is the triple tax deduction and the new tax regime is allowing all of us to enjoy tax free statuses.”

 

Future

 

“Where will the Sri Lankan fashion and apparel industry be in the next five years?” was the final question Mirchandani posed, to which Amalean responded: “The industry has potential with the knowledge that exists in it and the knowledge of the Sri Lankans who have gone across and shared with the rest of the region by working in all these countries and training on these projects. I believe in this whole hub concept using Sri Lanka as a customer interface where we have the merchandising, product development, designing and innovation and use the rest of the region as a manufacturing base. The other important factor is having bilateral relationships, which is extremely important to our sector. Wherever there have been concessions, whether they are multilateral concessions or bilateral concessions, industries have developed and grown and Foreign Direct Investment comes to that country along with new technology. I believe that for our industry to continue to prosper, we definitely need to look at how we engage with other countries with bilateral relationships and trading relationships.”

 

In response to a question posed by the audience on how sustainability can be used in innovation, Amalean said: “Sustainability inspires innovation. I have seen a lot of innovation done with sustainability in mind. Reusable material, water in the dying process – whether it is possible to dye without water – likewise there are new processes coming up.”